Sunday, December 21, 2008

Stock Market Indexes End Mixed As Quadruple-Witching Options Expiration Sends Volume Higher

Stocks started off strong but as the day wore on indexes pulled back with some finishing higher and some finishing lower. The one bright spot out of all of the indexes was the SP 600 which rose 1.6%. The IBD 100 and DJIA fell .3% leading the way lower. The loss on the DJIA was the second distribution day since the rally attempt started and the IBD 100 is not only lagging all the indexes in this uptrend but it has not even taken out the 50 day moving average. When this is the case it makes it hard to be real excited about today's action.

About the only real positive that I could find with today's action was that there were more stocks in my long scans than there have been in a long time and that raises my confidence level a little bit that maybe we could get a bear market bounce sometime soon. This bounce is too lame for it to be an official bounce in my book. Unless you like gambling and can get lucky and buy HSNI at the exact bottom and get a 250% return in nine days. However, if you got that stock, I am sure you were burned by the other 99 out of 100 you attempted a move like that on.

The sad fact remains that this market is not looking that great. The stocks that reside in the IBD 100 and IBD 85-85 are basically void of any "hot" chart pattern. Nothing is setting up in anything that has me extremely excited and ready to go long. Instead the few longs I get from leading stocks in leading industries have a tough time making headway and once they are up 20% have usually seen the most of their run. This is not the action of a healthy market. In a healthy market you will get 20% gains in a few weeks, a consolidation, and then another run. However, this market has not been very nice to breakouts.

Recently that has changed as two of my three new longs the past week were up 9% and 10% today. This kind of bullish price action with the green BOP increasing gives me hope that this bounce can last longer than just a few weeks. If this bounce can last longer I should have a few longs that should return some very nice gains. And to be honest, that would be an amazing thing for us growth stock/CANSLIM investors that have been waiting a long time for leading stocks to work.

Now, not to say there hasn't been any leading stocks. There has been. The only problem is that it was on the OTCBB. AIPC on Telechart clearly broke out on 6/18 and 8/7. Had OTCBB stocks been in the system this stock would have been a CLEAR long with that price, volume, and max green BOP action. However, since Telechart does not have these stocks, I missed a 124% gain and a 98% gain on both CLEAR buy signals. This is not the first time an OTCBB stock has built a great chart to produce big gains.

Back in 2006 FRPT was listed on the Nasdaq and soon after Telechart grabbed the OTCBB data. Sure enough, price-volume-max green BOP were loaded on this chart. From 9/5/06 to 5/30/07 FRPT stayed in a steady uptrend above the 50 and 200 DMA producing a 335% gain in under nine months. Back in 2006-2007 it was not that big of a deal as longs ranging from GIGM to HRZ to AFSI all showed up during that time.

But this year it has been a barren wasteland of nice charts as ACM on 6/27 was the last "hot" chart to setup in a "near-perfect to perfect" setup. ACM failed and since then NOTHING has come close to looking like AIPC did on 6/18. So if anyone is reading this that has any kind of sympathy for us active investors that like to produce 100% to 3,000% winners, please go to the Worden User Forum and join me and others in requesting charts for OTCBB and Chinese companies. In fact I would like every stock on every stock exchange to be placed on Telechart. I am sure they could do this and I would be more than willing to pay the extra fees. So please everyone help me petition for Chinese, OTCBB, India, and Latin America charts.

I am sure Worden will do nothing. But it can't hurt to ask. Maybe one day he will wake up and realize the value in such a service. It is a global market now and the USA sure isn't a haven to the worlds newest and most innovative companies anymore. We need access to more markets.

Anyways, back to this market. right now we have a market that is not showing us much. When we go back to the top in October 2007 we are definitely in a long-term downtrend. That is why I have 24 out of my 34 shorts from before the major selloff that started in September. All of those stocks are up over 15% during this time with the best of them up over 75% for me. So being short is obviously the right play for the long-term. This trend is also still in effect from the summer of 2008 so the intermediate trend is down to confirming the holding of these shorts.

As for the sub-intermediate trend, we are definitely lateral as the SP 500 has moved a whopping -1.26% from October 10th to December 19th and the Nasdaq has moved higher a whole .8% from October 24th to December 19th. This lateral trading range has caused me to go long and short a few stocks with mixed results. The good news is that the stocks that are working during that time are producing gains larger than the losses. So even with the poor recent record due to the trading range market, my new longs and shorts have not really caused me any problems.

On the short-term the trend is definitely up and this is confirmed by my recent longs moving up 10% and 9% today with my new long on Wednesday moving up almost 7% on Thursday. These quick gains right off the bat show me that going long is right for now. However, unless these charts continue to build on their current gains with more gains on heavy accumulation with green to max green BOP there is no guarantee that we can hold these gains with the weak volume in the indexes on this uptrend.

If this uptrend was moving higher with volume well above the 50 day volume average and we could take out the 50 day moving average and hold above it convincingly then I would be much more bullish with our current situation. However, it appears to me this uptrend is on low volume and with a couple of days of distribution it might not be long till we move lower.

So the best bet is to continue to be heavily cash, take some profits quickly when we have them and remember in the long term our methodology will always beat the market. That is why we have gains in our long term shorts like these top shorts w/ their total returns UP today: CYT 61% OKE 37% CEO 28% SDA 74% AMX 40% APD 49% SBAC 49% CEDC 59% POT 55% MOS 60% CETV 76% CASY 19% PLCE 26%. Not only did those shorts do well but don't forget my three new longs: 10%, 9%, and almost 7% right after going long. This market is not for the weak and only the very skilled experienced investors are going to come out of this market with more money than when they entered.

I am just happy to be on that short list of people. I don't know many up this year but all of my current subscribers can happily let you know, via their own personal returns, that this year has not been a bad year for us. When you compare it to the 1999 and 2003 years where you can return well over 1000% if you move from one HUGE winner to the other, this year isn't that good at all. However, if you compare our returns to those of Bernard Madoff, Bill Miller, Ken Heebner, Jim Cramer, and every other mutual fund out there this year, this year has been an amazing year!

When you cut your losses, go with the trend of the market, and stay extremely disciplined in your methodology it is almost impossible to go broke no matter how bad of a market environment you are in.

Don't forget, there are only 12 days left to take advantage of our 25% offer. I will not be running another deal until next Christmas and I will only run the deal if every other financial website runs one. I really want to get you ready for the next bull market and teach you how to make a ton of money in the stock market without EVER having to listen to another "guru" on CNBC for the rest of your life. Look at those returns in my Past Big Winners and look at the returns I am producing now. If you have losses for the year, don't you think you owe it to yourself to see what you are doing wrong?

Happy Chanukah! and Merry CHRISTmas!!!! everyone. Next week is a holiday-shortened week and boy oh boy can we use it. Aloha, have a great weekend, and I will have the free small youtube video up before Sunday. Gold and Platinum subscribers can watch full size version of market wrap video one, two, and three on the Gold Forums.

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